TIMING WRONG FOR DRAWDOWN OF CRUDE FROM SPR

Now is the worst time in the history of the world for the US government to market crude oil from strategic storage. Yet Vice-Pres. Al Gore wants to do precisely that.

Now is the worst time in the history of the world for the US government to market crude oil from strategic storage. Yet Vice-Pres. Al Gore wants to do precisely that.

During a campaign stop at a heating oil distributor in St. Mary's County, Md., Sept. 21, Gore proposed a phased drawdown from the Strategic Petroleum Reserve via a series of swaps of 5 million bbl each.

He said the swaps would increase volumes of heating oil available for winter.

He's wrong about that. And he's wrong about tapping the SPR.

The market needs more crude oil than is available now, to be sure. But it needs crude for storage, not distillation towers of refineries.

Especially in the US, distillation capacity is fully utilized. Refiners can't run crude much faster than they are at present. So more crude won't mean more heating oil.

Gore is ignoring a very important stress on the market: a processing bottleneck.

More crude might indeed ease crude prices and help replenish inventories of raw material. But under current conditions more crude via an SPR draw would be largely just a transfer from government to commercial storage. Because of the processing bottleneck and low product stocks, the effects on availability and price of heating oil this winter would be negligible.

What is more, the market can work its way through this shortage. It is already doing so. But the adjustment is vulnerable to upset because of the low volumes in storage.

One potential upset was described here last week: a politically inspired production cut by Iraq. The SPR is supposed to defend the US against that type of mischief, not against a market swing, however extreme it is. The tight market increases Iraq's leverage.

Two things discourage a maverick producer such as Iraq from resorting to such mischief. One of them is idle production capacity elsewhere-now mostly in Saudi Arabia. The other is crude hoarded for the express purpose of offsetting voids that occur for reasons beyond the market.

SPR is supposed to fill the latter role. A premature drawdown blunts the weapon.

A disadvantage of SPR has always been the temptation to use it for domestic political purposes. Gore's proposal makes the threat real.

An SPR draw would of course look to some voters like decisive response to an issue of legitimate popular concern.

In fact, it would amount to a purposeless expenditure of strategic defense just when a real strategic hazard loomed into view.

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